Tero Isokauppila: Amazon's #1 Coffee Seller Shares His Secrets

Foreign.

He decided he wanted to be the number one coffee on Amazon and he's already outselling Starbucks, dunkin donuts and McDonald's. And he did it without raising a ton of capital and by mostly flying under the radar. Taro Isocopolis is the founder of four Sigmatic. That's the mushroom coffee that you see all over the country. Tara and I go deep into where we are in the cycle of E commerce for what's working now and what he would do if he was starting a brand new business in 2024. If you're watching this, pay attention to how Tara was doing just a million dollars in revenue a few years ago, fast forward. And he has over $50 million in revenue. And he talks about how he made that transition. And guess what? The first milestone for all of you who want to be successful eight and nine figure entrepreneurs is to just get to your first million. And you can do that by getting four products to 25 sales a day at a $30 price point. And we help people do that inside of our mentorship community, which is called the 1%. You can download our free resources and find out what we do below this video and at capitalism.com/1. Now let's dive into how you go from 1 million to over $50 million a year with the founder of Four Sigmatic. Tarot. Isocopolis Tarot. The way that I always like to start these is just to ask, how did you make your money?

Well, money has come in waves. It's not been a linear journey.

I can relate.

Yeah, I started working really young. I grew up on a farm. I started working as young as I can remember, pocket money. But at 16, I went to work. During high school, I worked nights in a paper factory. Paper unions in Finland and Sweden where I grew up are really strong. So you actually get paid more than like a doctor. So I was working in high school, no expenses. We don't get driver's license until 18. So my mom had to drive me to work. So I saved most of that money, bought an apartment, put it in stocks. So that was the first wave.

The, the first wave as a late teenager making wallpaper and put it into the stock market.

Yeah, it was.

High eight figure, not quite six figures in savings, which was like a good starting point.

You just said high eight figures, not quite six figures. How does that math work out?

Sorry esl, let's go on some tens of thousand five figures, not six figures. And, and that helped me give me buffer and safety. I started a few businesses. So then, then There was a dip. So my first ventures did not pan out. They lost money and I started losing savings.

So then what was one of those failures? Because obviously most people know you for your biggest success. So what was one of your favorites?

Very early on, on the Asia phenomena. And this is like 20 years ago or something. And with friends we try to create custom suits and home decor like bed sheets, linens and stuff from Vietnam, but we didn't speak Vietnamese. We never been there. We didn't know anything. And they got stuck in customs and it was just a mess.

Your first foray into E Commerce.

Yes. But also. Yeah, sourcing. That was like before China became huge. But anyway, that was.

China used to be smaller.

Yeah. Well, I guess for sourcing.

Right.

Sourcing.

Before you had all these options to just click a button.

You couldn't go to Alibaba, let's put it this way. And so I lost a little bit of money, still had savings, then had to take a real job. Like I worked in management consulting and in a big tech company, luckily in Switzerland, which. High salaries, low taxes. And that's when I started four Sigmatic. And the money didn't definitely come in the beginning. First two and a half years I took zero money out. So this time I was living out of the savings that I made by.

Working for two and a half years.

Yeah.

So for two and a half years you're living off the savings that you made working full time, but you were still full time in the business.

Yeah, there was a transition period, but the kind of a Venn diagram overlap. But there was a good year, plus that I was full time with no other income.

That's really interesting and kind of encouraging for a lot of people to hear because from the outside, four Sigmatic is known all over the country and all over the world. It's this big brand now. And that usually is the case from somebody raising a bunch of venture money. Yeah. And from going big really hard. And you were working full time for the first year, year and a half that you were starting for Sigmatic. I actually didn't know that part of the story. And then another year you're in the business full time, but you're not taking a salary, which means that you're paying people and they're making money, but you're not yet.

Yeah, the team was really good at that point. We had kind of a revenue share model where it was. They were entrepreneurial in many ways, which I'm grateful for. They were people I knew before. So there was a friendship and trust but yeah, that was it. I also moved from Switzerland which is high expenses at that point when I stopped working there and I moved to Asia, in this case Philippines because it was cheap, spoke English.

So Philippines was awesome.

Also cutting costs like living, you know, with expenses were lower. It stretched the penny quite a bit further.

Tell me more about this revenue share model that you had with employees at the beginning that is not common for a startup, especially a startup that is in E commerce that eventually scales to what it is today. So how is that structured?

Yeah, it's a great question. I don't think I've ever spoken about it publicly. So four Sigmatic originally started with another company incorporated in Hong Kong called Loan to Life. And I had two co founders with that business who then left like a couple of years later. And. And we're not part of actual four Sigmatic and the company it's today when we came to the US but the team from that organization roll into four sigmatic. So we say we started 2012 but realistically we started like 2014, 15.

And in that previous business it had a couple different revenue streams besides trying to build a consumer brand. It was selling bulk ingredients. So we had a margin range that we knew and it was like a quarter of the net sales went to a pool. And then the pool was distributed as long as there was a minimum amount. So if the, if we just didn't literally the baseline expenses were higher, then it didn't count. And there was also a ceiling. So if we suddenly sales went through the roof, you couldn't earn more than X. So there was a floor and a ceiling. But it was 25% of net sales went to a pool that got distributed equally among the employees.

That's really interesting. And so you carried that over into four Sigmatic as well. So everyone had an incentive to drive growth in the business for sure.

Yeah. And so initially also all early employees put some money in and that could have been like $5,000 but like it was like you had skin in the game.

What inspired that idea? That again, that's, that's super rare and creative especially for a startup. So what made you want to pursue that type of a comp structure?

Yeah, well I guess the really smart answer is I didn't know any better.

But it was very important. Early on it was more of a lifestyle business, you know, a la Tim Ferriss four hour work week where you try to build a business that meets your. Where your lifestyle more than you're trying to optimize for maximum business performance. Right. So the team was really important because I knew it was a lot of work and I could have not afford to hire your cookie cutter people at this point. And I honestly would have not known even how to do that at that point. So they were a group of friends. There was a trust factor, but there was also somewhat of a transparent model. So it was not like there was trust even if money was not coming in because there was transparency and revenue share. So it felt like we were all in it together.

Yeah.

More.

That's really neat. You mentioned Tim Ferriss which is interesting because I found out about four Sigmatic on the Tim Ferriss podcast. I remember I was running on the treadmill and heard him talk about this mushroom coffee. I was like, what? What in the world? And I looked it up just to see what the Amazon sales were because I look at it, we're on Amazon, I'm like, I wonder when Tim talks about a product, how that affects Amazon sales. And so I, you know, looked it up and you know, I'm calculating it based on bestseller rank and that's, that's me researching the product and then I bought it and I've been a customer ever since. How much I'm projecting onto the rest of the story. But it seems like that was a big moment of awareness for the company that someone influential in the space talked about it. How much of an impact did that have into the the product line gaining its collective awareness into the marketplace?

Quite a bit on brand awareness because he had a huge reach and at pretty soon after that we work with like Joe Rogan and others but he was like the first like major one. But I do want to warn people to think about like if you have Tim Ferriss or any other thing that would drive massive top of funnel awareness is you gotta have the funnel. Right? So at that point we already had a fair share amount of trust factors. We had tons of reviews, we had content out and we'd work with the kind of medium sized health influencers. So we had a lot of. Because a lot of people who originally heard about it laughed at us and they was like, that's really weird. Why would Tim talk about that? That's. I'm not getting it. Mushroom coffee didn't like. But because there was so much stress factors, I think the conversions were surprisingly good because then once you started to go down the rabbit hole you're like, okay, this is actually probably legit.

So.

Do you remember what the revenue was of the company before you made that investment into a large endorsement? Yeah, a few million Dollars So low seven figure company.

Yeah. And low to mid. I think at that point we'd had. We'd hacked on Amazon. We had some Whole Foods distribution in la. I think we were at Sprouts. So we had like a minor like natural channel retail business. We had not done well with Facebook ads because it was just such a weird product at that point. But. But on Amazon and particularly using buzzfeed we'd hacked ourselves into the number one coffee replacement, number one instant coffee and number one cold brew. And it was all like very hacky. But at that point Amazon was still. Except when like K cups it was a smaller channel for coffee, even health products. So it was still like within Amazon a niche product. But I think it was probably over a million bucks a that point for the coffee. But not much more than that.

What was the impact of that endorsement? Did it open up doors for you that you didn't expect? Did it increase repeat buyer rate? Like was that a significant impact in the long term growth?

Yeah, for sure it was. It was huge. It's hard to know at that point because we had a lot of things going for ourselves at that point both in retail and in sales. How much was Tim. But what I would say is when you work with someone like that can be someone else too is the halo effect is pretty meaningful. So we had an influx of other influencers then talking about us because they heard him talk about it almost validated for others. So you might even say that the medium sized influencers drove a lot more sales than Tim or Joe. But they wouldn't be there without Tim or Joe.

That makes total sense. But when you're a low seven figure business business shelling out the amount of capital it requires to sponsor somebody like Tim Ferriss is quite a risk.

It was all money we had. It was basically we were pretty much all in.

It was pretty much all the retained earnings you had at the time.

Yeah. Because also at that point and could fit Tim. But he asked for per episode was a lot. It's way more now. Like it was a lot for them. I don't know. Am I allowed to say those numbers?

I mean the last I checked it was like a hundred grand an episode with a minimum of three or four episodes.

It was less than that. But it was tens of thousands per episode and we had to commit to a lot of episodes. I want to say like 12.

Geez.

Because he was like I'm not going to take one for like a one episode.

Yeah, he.

But he had already what was cool about it. He was like organically into the product and he had, like, talked about it this and that.

So. And I knew the audience was a match, so I didn't see it as risky, but, like, purely as a numbers person, like our finance person at that point said, I was like, oh, we should not do this, we should not do this.

Let's just roll all of our money into Tim Ferriss and see what happens.

Well, the challenge actually, in a way, he was right. Because we were so tight in inventory, we kept selling out every single podcast. So, like, from a working capital point of view, there's actually a point even and it kind of amplifies because the higher the ROI is, then the more you're in the hole with the inventory.

Right.

So from a working capital point of view, even if it works, it can still get you in a big, deep doo doo.

Was this the point at which you're like, maybe I need to raise some capital or maybe I need to find some partnerships. How do you that. That is a hug of death that a lot of people don't get out of.

We weathered the storm and then the point when we did our first and only capital raise, we had passed the storm. So from a working capital point of view, but it was definitely when people started reaching out to us, we also, that summer or the following summer, I can't remember the exact timing, we did, like pop ups in, like, Montauk, Long island, where all the VCs and, you know, investors go so suddenly because of Tim and, and Hamptons were getting all these random reach outs, which, you know, I mostly laughed at.

Will you tell me a little bit about what that process was like for you, being mostly a bootstrapped entrepreneur up to this point?

Yeah.

And now you're talking with VCs, you're looking at capital raises. You know, the first time that I had any foray into that space was when I sold a company. I had no idea what I was doing. And I wish I could go back and mentor that guy and, and tell younger Ryan what to look out for and what to do and how to show up. It was a completely different world. Now I'm fascinated with that world. But for you, going into that, having this company that's now starting to grow and you have VCs offering you deals and structures that are probably new to you in some case, what was it like for you to navigate that and make those decisions and decide who to work with?

Yeah, I had a kind of okay experience and not probably the best possible, but definitely not the worst Possible. And the reason was that when I was bought the previous business from the co founders in Hong Kong and incorporated a new company in the US so founded for Sigmatic myself, there was a lot of paperwork and it was like not legally like US company buys Hong Kong company. Not like the simplest. We were at that point like a million bucks. So like it's not super simple and straightforward. So I had a great lawyer, maybe better than most startup people would have had at that point. And I learned a lot of things particularly on like what not to do and I was super strict. So like I, I've still today never given anybody like preferred shares. I didn't give like board control blocking like things like that. So I avoided all the horror stories that you hear that then investors would do and we had leverage because we were growing so, so fast and we were doing so, so well that I had leverage that maybe not everyone has. I'd also been laughed at so many times leading up to that event when I was trying to raise like 100,000 or 200,000, like just give me some money for inventory and people just laughed at. So I avoided all the horror stories. But what I didn't have the maturity and understanding is taking that capital in a right way to make it work for me. And I think that's, you know, more of the black belt stuff is like leaning into that world. I didn't, I never leaned into it. I, we've, we've raised very little money and with very specific terms and very strict which avoided the downside scenario. But at that point capital was very inexpensive and, and we could have grown a lot faster and done certain things, hired more senior people earlier this and that. So I could have saved a lot of time. Someone said that like you always create some sort of a debt or some sort of a deficit somewhere. So if you don't raise money or you don't have capital to start out with, then you create tech debt or you talent debt. So somewhere there time debt takes longer. Yeah, so in our case it was more probably time and talent that took us longer. And we didn't hire people who actually knew what they were doing. We hired really passionate, amazing people who had a knack for like execution and we were really good at that. But people who are maybe more strategic experienced thinkers until much later.

Yeah, we run a small fund@capitalism.com specifically for E commerce brands and there's a couple of brands that you know, we go in and deploy just a little bit of capital and then do some inventory financing and it Saves them two years of rolling that money back into more inventory and more inventory. And it drives. We ran the numbers once and we're like, okay, if you're paying 10% interest on an inventory loan, but it drives down your cost of goods by 15% because you're able to make bigger inventory orders, you're saving money, you're not spending money. And these are things I wish people had told me early on, and it's a good way to put it, that you have some sort of debt. Regardless of what you're doing, it's either going to be financial or it's going to be made up in some other way. Now you have this. I don't know what your involvement is at four Sigmatic anymore. I'd love for you to tell me, but I know that right now you're starting your next venture. And it's really exciting when you talk about this new venture. So tell me about your role at four Sigmatic now and tell me what you can about the new venture.

Yeah, I'm founder and CEO of four Sigmatic. That's the bulk of my focus, if not almost all of my focus, but at the same time, a couple years ago, with a friend of mine, Mickey, who has been part. Yeah. With part of your community as well, she wanted to found a. For lack of a better word, like a sustainable diaper company. She'd struggle with her own child hero with just like, how horrible diapers are for the environment, but also for the parent and mom. And she had read this book about using mushrooms to create basically an eco diaper. And she approached me and said, hey, can you help me with this? And I was like, no, I'm too busy with four Sigmatic. And then I had my first child. And I was like, oh, this is a real problem for the planet. And I was like, okay, I'll help you get these scientists and the technical stuff. She's a real dynamo and can get stuff done so fast and so well, but she maybe didn't have the domain expertise and, like, who's legit, who's not. And I was like, I got that. And the company is really exciting. There's limited stuff I can share about it. We're set to launch the products in late 2024, so there's only so much I can say about the technology itself, but it's. It's very disrupting, not just for diapers, but for basically all kinds of consumer plastics.

Yeah. Mickey has shared a little bit about it and here on the podcast and whatever she's Selling I want to buy. Right. Because she's so convicted about what it is that. That y' all are doing. There's something that you shared at capcon last year on the stage when you were talking about how you think about new ventures and new products. And you called it your blue ocean strategy, which is a term that a lot of people are familiar with, but you talked about it in a way that I had never heard before. And it was combining two ideas, two very different novel ideas, and bringing them together. And that gives you your blue ocean. And really fucked with my head because. Because now every time I think of a product, I think about some random thing that I could combine it with, like food and candles. Let's eat some candles. And now I can't unsee it every time I think about a new idea or a new product. So would you walk us through how you think about creating uniqueness in product lines?

Sure. Well, first and foremost, the Blue ocean strategy is a famous concept created by two professors at insead, just south of Paris in a fancy MBA school. And it talks about how instead of fighting in the red ocean with a lot of competition, you want to be in the blue ocean, where there is no competition. And they set out few different strategies on how you accomplish it. And a lot of people are focused on that book in very complex charts, art. So those two professors show how you can do these blue ocean canvas mappings. But when I read it, I'm not that smart. Like, I have an mba, but it doesn't mean I had it late and I didn't really pay attention. So I had to figure out, like, the concept that they proposed made a lot of sense to me, but the mapping less so. So in the book, they say that in order to find the blue ocean, you need to think about something. You consciously are better than others, consciously worse than others, which I love, because a lot of people, entrepreneurs, don't want to consciously be worse at something. And then you create something new that doesn't exist in the category, and you cut something out that someone else does. And they. They give a bunch of examples from, like, Circus Soleil, where they. They have a circus but no elephants, because elephants are expensive and smelly. But then they add a new element, which is the theater. So they combine theater and circus, and there's a story arc. You know, that's just one example. And that really made me think that, like, what it really is, is you're combining two known entities together in a new kind of value problem. That's how I look at The Blue Ocean strategy. So in the case of four sigmatic, it's coffee plus mushrooms. And the mushrooms support with the health benefits of the coffee, making the coffee healthier and better. But also the coffee helps to mask the bitter flavor flavors of the mushrooms that otherwise people don't enjoy. And now I think I have like 100 of these examples of, of things that you do that. But you take something familiar and then you try to find something that's important to the buyer in that category and then you borrow a concept from another category or product together to battle the negatives of what those buyers want. So combine two known things. But it has to start with the mindset of like in the main category in case, in our case like coffee or diapers, you look at like what are the pain points for those consumers and what can we borrow from something totally random to help solve those pain points.

Is it truly something totally random like you'll just pick something or do you usually to see two similar things and try to combine the best of both worlds?

You could do it either way. I think the obvious is way to think. If we focus on consumer products. I know your audience has a lot of them have different kinds of supplements. Beauty like consumer facing. I think little less B2B. There's some but.

Right.

So in the case of consumer products, you can think of it that people are greedy. Consumers are always want more. They're never, they always are open to more as long as they don't have to sacrifice too much with like convenience, flavor and price. So you always want more. So if you drink water. Why don't I drink water with vitamins or with electrolytes?

Right.

So it's the water, but I want more. But I don't want sugar. So that's why element is great because.

We'Re both drinking right now.

Yes, because you, you want the main thing. So without the water, the hydration, then it's like there's been a lot of, you know, electrolyte products. But then like people are like I should drink more water. But it doesn't maybe doesn't taste good or something. So adding those things makes sense. So I think in consumer products it's very, it's a little more linear because you can think of like complementing things. I think if you want to be really disruptive, then you have to look really outside the box. Like putting mushrooms in diapers is pretty outside the box.

So they're nootropic diapers. They make your baby smarter. That's how this works. Well, it also Occurs to me that something that I saw you do well with four Sigmatic is mushroom coffee is kind of. It's a weird idea, but it's just weird enough that it makes me curious. It's just weird. If I go, that's new, it's novel. It's not so weird that I would never want it. It's just new enough that I would try it on an impulse purchase.

Well, for an online marketer, we can talk about it. I don't look at it this way, but I know people who do. Is the thumb stop or like, how do you stop the scroll? So like, it needs to be unique enough that you're pause. It's like, wait, what? And then it needs to be familiar enough that you do convert. So there is like teeter totter there. So like, if you're not novel and unique enough, you don't get people to stop. If you're too out there, you might not make the purchase because it's just mentally like, oh, I can't get there. Right.

Yeah, it makes sense. So why don't you tell me a little about if you were to do this, if you were to do four sigmatic or any. Actually any brand looking into 2024, how would you go about launching a new brand? Things are a little bit different than when you were sponsoring Tim Ferriss. Yeah. So now that the marketplace has matured some, how would you go about launching a new brand in this era?

Yeah, I think some things have come a full circle and some things are drastically different. So things that have come full circle is when we started, there were some people that did really well with paid ads, but paid ads were not a huge factor and we couldn't afford them because we didn't have outside funds, funding. So you have to actually rely on happy customers. And I think because of cost of what a concept. Yes, yes. And I think that's now a thing again. So word of mouth, you would argue it's always been the most important thing, but I think it got under indexed a little bit during, you know, the explosion of Facebook ads or.

Or Covid. Yeah.

Yes. And. And I think influencer marketing was a thing for a while, but like really what it is about is word of mouth and referrals. And. And the reason there is CPMs have gone up. Tracking is harder. You know, audience building is harder from at least online. And I would say also the tech advantages you might have had in the before are not really there anymore. Everybody's in mostly the same.

Stacks. Like you're on shopify you're on Klaviyo or Kendo, like whatever. There's like handful of options for each. So there's like tech advantages are rare. Like back in the day you were as a small company, if you knew where to look. There was cost efficient ways to have like consumer experience advantages online. I don't think you have consumer experience advantages online anymore. And then what I've seen at four Sigmatic is like literally everyone copies us all the time. Launched a new ad. We're like, we're the original mushroom coffee. And then we're like, we're the number one mushroom coffee. And literally like within week I saw like five different brands create iterations of our ads. Somebody's tracking it. Another example, about a year ago we first thought to make this is a little bit of side tangent, but it was going to go somewhere. We decided to finally take Amazon seriously. It was, Amazon was like a necessity for us to get going, but it was always our weakest. We focused on retail and D2C more. And about a year ago, for a bunch of reasons, we're like, oh, we'll take Amazon seriously. At this point we were like on our main product, which is Crown Coffee. It's a more competitive category than instant coffee. We were like top 10 to 15 depending on the day. But we had passed all the upstarts. But it was like now it was like Mac Cafe, Dunkin Donuts, Pete's Starbucks. There was no more functional, better for you coffees. We had passed all those. So we had a.

Yeah, now I'm going to say it right. Eight figure business on Amazon high.

Eight figure almost six figure business on Amazon.

Yeah, exactly. Now I'm going to say it right, but eight figure business low. But we're like, oh, I think we can triple this. But that requires us to get really new people into the platform. Fast forward, we got like number 8, 6, 4, 3, 2. And then we hit number one like a month ago. And for coffee for.

Yeah, that's amazing.

And we passed everyone, including Starbucks. And funny enough, like a week later somebody at Starbucks woke up and they added all their products together. So if you're familiar with Amazon, you put a twist so you can put multiple SKUs in one listing, which is totally fine. You want to have maybe medium roast, dark roast or vanilla and chocolate. We have four items in our listing. Suddenly Starbucks combined all their reviews and they had 104, 104 in one twist to get back to number one. Funny enough, few days ago we passed them again. But it's the race is on. The back and forth is on, but everything gets copied. The point of that tangent is everything gets copied. Like using Replo or whatever, you can literally copy anybody's website in.

I actually don't know what is Replo funny, have I?

We stole our own website with Replo. So that's another funny story. Replo is basically a really convenient way to build websites. It's very good for landing pages. Like, that's where it shines. But you can copy and go take Liquid IV's code, basically, and you can create copy Liquid IV's Shopify with like 500 bucks a month or something like that. And if you don't want to do it yourself, you can hire someone for like a thousand bucks. And then you populate your own copy and your own images and you have, if you know a site that converts like crazy, copy theirs. And. But what's cool about it for landing pages, you can take this element from Ritual Vitamins and then this element from, you know, Liquid IV and Vital Proteins. And they have a bunch of brands, including four Sigmatic. We have an international site and we paid a lot to build our website, probably too much. And then we had to create an international site with the new branding to replace the old site. So we just use Replo to copy ourselves for like. For like 500 bucks. We stole ourselves.

That's fantastic.

And we saved so much dev time and so much things. But everything can be copied. Cost of media is high. Building audiences is hard. Tracking is difficult.

You're really selling building a brand in 2024 tarot.

But that takes you back to. The thing is, if you have a real thing, like we didn't beat Starbucks on Amazon because we were like better at growth hacking or because you have.

An IPO that raises billions of dollars.

No, we didn't have more money. We didn't have. But what we had was mushrooms. The product was differentiated. We had people who loved it and shared it and that got on subscription and that was sticky. So really working on those. Not even the first thousand true fans, but like the first hundred, like obsess over the first hundred true fans and get a hundred people to be your advocates. So even in today's I can have access to capital, I can have connections, and I can pull favors and levers. I would still obsess over that first hundred consumers and their experience before putting the gas on and pushing hard and really trying to figure out, can you make. I think you need two to three offers at any given market.

But before you go On I just, I need to. It's amazing you're saying this because we have been focusing so hard in our mentorships about getting people to build a list of a hundred people that are just ready and waiting to buy your thing. And it is amazing how much that moves the needle because those hundred customers, first of all, especially if somebody is an early founder, 100 customers means something. And that is at least a few thousand dollars, sometimes in pre sales or, or after a launch. And they become reviews and they become testimonials. And we have one member, one of their first, I think it had 150 people on a launch list and one of those people gave them just a quote and that quote became an ad and that ad converted and those conversions brought more people like them. And it was just enough to move the needle and get to a six figure a month run rate starting with a hundred people. And I think people skip over that part and go right to scaling when they haven't built that raving fan base first. So it's amazing you say that.

Yeah. And three ways how I would think about it is can you do a challenge and can you get a group of people, 100 people or something to do a challenge? And by the way, some of those people will not be your 100 true fans, but through the challenge and somehow incentivizing the challenge or getting people on board on the challenge, you'll probably find out who had the best results, who solved the problem, who had the outcomes that work and then figure out if it's that target audience or how they got positioned or what was it about it that they had to challenge. The other ones are communities. Build a community first, private Facebooks, forums, this and that, ideally in person. So can you start having meetups and build a brand around a meetup in person. And the other thing I would do for the scale up phase is I would build direct to consumer or in person until you figure out the product market fit, target audience, messaging, the click the first hundred superfans. But I would build it with retail in mind. At four Sigmatic we had small packaging, lightweight, perfect for e commerce, horrible for retail. Retail you want big real estate. So when designing a product now.

I think the days of getting to massive DTC businesses are. It's a lot harder but it's easier to start on DTC than ever before. So DTC is great for figuring out product market fit, audience fit, messaging fit and then once you have it because retail is slow to pivot. But I think today's world most Good brands, particularly on the consumer side, sell in retail. So I would try to get to retail super early because retail, even though the margins are lower, it's probably a more sustainable, profitable business.

That's, that's interesting. I have never heard somebody say that. Most people have the opposite opinion. I do think it is probably harder to build $100 million E Commerce Co. Now. But I think it's easier to get a $1 million company.

Completely agree. I would even say 3 to 5 million is easier than ever. And 50 is harder than ever because before like when we started, if you got to 10 to 15 million is almost impossible to mess up because so few brands got there and you had figured out something versus in today I think you can get to 10 to 20 million and still mess up. So I think going to retail, the quality of revenue, the profitability, the brand awareness, the M.O. there's a bunch of reasons figuring out just one, two, three retailers. But go there when you know you have the audience, the messaging, the packaging, the product set up because it's expensive and hard, almost impossible to test in retail. So do demos, go to farmers markets, do if you have software, get beta users for free, whatever to do. So use the kind of direct to consumer play and then with Amazon, kind of depending on the category, ride the wave. So set it up early. But I wouldn't scale early until you have enough ratings and reviews. So the quality of the listing is so important.

Initially you just keep that as like maybe get your couple best products there, get the listing going and then on year two, three, it's ready to scale. I think it's harder and harder to get started on Amazon. Cold in a sustainable way.

Cold if you're starting with no audience, if you don't have those raving fans. But we found that if you build even a tiny group of raving fans and then you send them to Amazon, Amazon can grow really, really quickly.

So the cool thing about Amazon for a new brand today more than ever before is just the conversion, the trust factor. If you have a DTC site, although people are used to E commerce, a good site converts 2, 3, 4%. I don't know, does anybody get more than 4? Maybe some do 5. But it's hard to get conversion rate on Amazon could be 20 to 30.

That's right.

And so the, the returns, the prime shipping, all that stuff. It does help in the beginning to drive traffic directly to Amazon. For that specific reason you get more trial. And I think trial is easier on Amazon early.

But where, where I think we're combining the two strategies like a Blue Ocean strategy or a brand new capitalism.com strateg.

What you are saying is that if you were starting a brand over today, doing almost going slower until you find where you are truly unique and different and better than everybody else is what you need to identify. It's finding where you really stand out in the marketplace. Where a lot of people mess up on Amazon is they're able to build communities or small audiences and so they can get the initial lift on Amazon, but they don't have the product quality or the differentiating factor that allows them to break out into being a brand. So if we were to combine these two strategies of building the raving fan base and then combining it with Amazon and having the uniqueness in the marketplace, that is where I think you can still break out and where there's still a ton of opportunities.

Yeah. And I'm curious to get what has been your community's Blue Ocean strategies. But what I would say are true for pretty much 50 years ago and today, and I assume these will be true in 50 years if we talk about consumer products, is that the word of mouth is where you need to get to sooner or later.

In order to get there. I think you need to have a brand. I think if you don't have a strong brand and brand doesn't always mean fancy design and fancy things, but you need to have a voice, a recognizable.

You stand for something.

You stand for something, whatever that is or someone and that doesn't need to be fancy. Like I think Craigslist is one of the strongest brands there is. Right. It's. You go there and you know what it is. It's very. You stand out. They haven't tried to make it look fancy.

That's right.

So if you don't have a brand, a recognizable voice, it is a little bit of a race to the bottom. And then the hero product, you can have a big catalog that long tail, this and that. But like what is the product? And that's I think where the PLU Ocean is so valuable if you can figure out a hero product. And the search for the hero product can take a while. But the end goal is, I think to make something meaningful, you need to have a hero product.

You brought up how our community has used the Blue Ocean strategy and there's two examples that come to mind. Both of them saw your talk at capcon and one of them was named Damian. I think he had a private conversation with you at some point. He was selling low sugar cookies and you remember this?

I remember the chat. I tried it.

Yeah. And. And he was doing okay. He was actually selling a good amount of units, but the margins were just horrible. And so they really struggled. And so they. I don't remember what their second thing that they were comparing it to, but they ended up pivoting over to a cookie skillet. So you buy the skillet and it's a high protein cookie skillet that you bake and then you pull out of the oven and it's a high protein, low sugar, like dessert that's scooping out of the skillet. And they're pre launching it right now and it's going incredibly well. There's another brand, Ryan and Tristina. I don't know if they took this inspiration from you, but they're following a similar strategy where they had this margarita mix company that was doing okay, but their differentiating factor was that it was low or sugar free. Low sugar or sugar free. And they ended up. They really liked those.

Sweetened pumps that people put into coffee. And I can't remember the name of it. You see them everywhere. And they had an artificially sweetened version, but they didn't have a natural one. So they took the same idea of what they were doing in the margarita mix business and they moved over to doing syrups that people were putting in coffee. And it's taken off. And so they launched that in I think November of 2022 and they're already at about 2 million in sales and they were just bootstrapping the whole thing. And it's taking off by combining these multiple ideas.

Yeah. And the classic way to do the Blue Oceans can be sometimes packaging like interesting. It is actually weird. But you could take a new pack. I mean, to me it's a little gimmicky, but you can absolutely do that with different kinds of attributes. So the delivery system, the consumer experience is a way to do it.

So yeah, you mentioned how important it is to stand for something, but what about standing against something? So your partner on the diaper company, Mickey, she is a PR master. Anything that she sells, I want to buy. Like, I just listen to her talk all day long. And she is really good at creating an enemy or a cause to rally people. Do you use that in the way that you think about getting the grassroots to promote your brands?

Not initially consciously. Now I think of it more, but I think it's always been similar probably to Mickey is that she's a passionate person that believes in very strongly in things that are good and that are not good. She actually started a gluten free pizza chain originally in New York City. And just like standing against gluten or you know, whatever may be like shame of periods. Like women should, shouldn't be ashamed of the periods. It's a natural thing. Led her to do a periodic underwear. And similarly I've had these like enemies that have been in my head. But I think it really helps to define. One way to think about it is both with strategy and what we talked about. The Blue Ocean strategy is like a lot of founders always want to say yes. They always want to say yes to this. Yes to this. Like should I do add this functionality to my product? Yes. Should I add this functionality? Yes. And we struggle saying no or like where will you consciously be worse? Or where do you say where you draw the line. But those where you say consciously no or where you draw the line is what defines the brand. So having either an enemy or a little bit of a scandal consciously or unconsciously helps define the brand. And the longer the brand has been around, the less there's maybe need for it. But initially when you launch and you're like having an enemy or a friction, a scandal, even if it's in your head, really helps.

Yeah. I mean branding is so much about who you serve and what they stand for. The easiest way to rally people together is to have a common thing that they're against.

Yes.

And especially if it's something that is that no one said no to before. Like we're going to stand against this.

Yeah.

And we see this in the media. Like whatever the hot thing to be for or against. You can build an audience being against that thing or against that person or against that politician. Yeah, it, I wouldn't call that a good use of your time. But in your brand, if you have a common enemy or a belief that you are against, I think that is one of the fastest ways to rally people to the thing that you want to take them into next.

Communities is what you're essentially building. You're trying to build your community. In order to build a community, you have to have stuff the community says no to. There has to be boundaries. And this is I think true for any community. A family unit, for example, like what are the, what are the non negotiables or whatever it may be. But you also need symbols. So having symbols and boundaries is another way to think about it. The better if you tie to a first, first principle, a mission, something that will be true in 100 years is ideal versus using it like a gimmicky thing that just happened. Like, like there's some, like, mushroom competitor brands that have done really well as of late by being like anti Adderall because there's Adderall shortage. So all their ads said, hey, people are out of Adderall. Try mushrooms. We didn't do it because it felt like this is a little gimmicky. But that works because you stand against something Adderall and defines the audience. But then ideally you whatever the enemy is or the friction would be something that would be true in 100 years based on first principles.

You just gave me such a good idea. So I wrote this down so that I don't forget it. I've had this idea before, but you've helped solidify this for me is, you know, I bought back my old supplement company and it's been way a way bigger, longer turnaround than expected because the previous owners had run it into the ground. Yeah. And so we have to rebuild this whole thing from scratch, which is harder than just starting.

Way harder. And I.

And I'm like, I'm kind of embarrassed about it actually, because it's taking so darn long to turn around because my old company and the thing that I want to stand against is the dad bod. That's the thing that I want to make the enemy. And we wrote this book draft is actually sitting on my hard drive right now. It needs proofread. It's called From Dad Bod to Father Figure. And while you've been talking, I've been thinking about, like, how do I use the enemy thing for this brand? And for me, it was like, the dad bod is the enemy. It's like kind of in vogue to have a dad bod. It's almost. Some people consider it sexy. No, it is not. No, it is not at all. And so. And that is. And I was sitting here going, what can I get passionate enough to be against? Because I don't want to be unethical in what I'm against, but you can even tell just by me talking about, like, I'm getting pumped about this idea.

Of are you open to the feedback?

Yeah.

And the more you can tie it fundamentally to longevity and being longer with your children or something, I think it's more sustainable. Again, first principles is like, what is matters is like, hey, if you have dad bod, you probably have higher cholesterol or, you know, all you're at risk for cardiovascular disease.

Yeah.

All cause mortality goes up X percent. Right. So it's not a symbol to celebrate because all cause Mortality goes up X percent. So tied into that first principle and then the other one is allow people the, the understanding, like I get it, that it happened. Like, I think fit to fat to fit. Drew did a really good job. Yeah. Do a really good job by like acknowledging always been fit, always been amazing. And then like going through the journey and like getting into like how it does it feel to be in his case, like, oh, obese really fit. Obese, really fit. And like, what's the process like? And I think there's probably something there. There's probably shame. There's, you know, there's a lot of feelings and if you can explore those, I think there's something really powerful there.

Yeah, I appreciate that. That's helpful because like, I gained a bunch. I mean, you can look at my YouTube videos. It looked like who ate Ryan a couple of years ago. Like, who's wearing this Ryan suit? And oh yeah, it turns out it's a little bit harder to keep in shape when you have kids because your hormones are like. We give a lot of attention to the hormonal changes in women, but almost no one talks about the hormonal changes in men. And there are very. Do you know, the more active the dad is with his kids, the lower his testosterone. That's just fact. And the reason is because testosterone is an anti bonding agent. And so what happens is like the better a dad you're trying to be, the more fucked your body. Yeah, it just, it becomes naturally harder to stay, which is such a weird concept.

And isn't it explained also, like, if you would have high testosterone at that point, you would be less likely to stay with your family. But by nature lowering the testosterone, you're likely to stay with the family unit, which is.

Well, well, it's, it's kind.

That's a theory nobody knows.

Well, it's, it's kind of ironic because you are more likely to forgive me for I'm gonna get comments on YouTube this way you're more likely to become like beta male in the fan, like soft, committed to the family, like your TV dad. But that often drives wife away. Yeah, she's no longer attracted.

Totally.

So what is better for the family? Yeah, keeping it together and not rocking the boat. But we have nuclear families. We don't live in tribes anymore. And so that doesn't look so sexy anymore. And so you have the loss of polarity between mom and dad, which can create its own set of challenges. So it's super interesting when you start to dive into it and you can tell I get pumped about this, so thank you for this.

And figuring out what are the symbols, what are the anti symbols that create the dad bot that people can relate within your target audience. And then what are the positive symbols? Let's say pull ups. And one of the symbols of the community is like deadlifts or pull ups, whatever is like a safe exercise, but it's compound that drives a lot of burpees. Yeah, yeah, burpees. But then you create like challenges and those few things become the positive symbols, but then you have the negative. The dad bought creators that you as a community and I think they need to be usually something that at least some of them people don't acknowledge. I think this at least in the fitness I've noticed that if you say the obvious, sleep better, higher testosterone, that can be one of the three, but nobody cares. So you sadly have to have something unique, controversial.

Like a food like oh, I celebrate broccoli sprouts or something. I don't know what it is, but you gotta have something novel or people don't pay attention.

Well, you'll be happy to know that the testosterone booster has mushrooms in it.

Great.

Because she legit is one of the proven testosterone boosters.

Is actually extremely effective. So that's one of the core ingredients. So you'll be happy to know that you started to go in a direction that I really appreciated, which is that as founders, we're often tempted to say yes to everything. But there's so much power in saying no. And something that I have noticed about you, Taro, is we don't know each other that well. But from what I know about you, you have kids, you're married, you're CEO of a company, you're starting this other company, but you seem to also have a level head and some reasonable amount of balance. You don't care about the limelight that much. You like your life. And it seems like you have a very clear filter to what you say yes to. It seems like you're very conscious about what you say yes to. Is that a correct assumption that I have? And if so, what is your filter for saying yes?

I think it's like a map with a compass that you constantly have to check yourself in a way. And then the more you do it, the more the more intuitively you do it. But you still have to keep constantly check yourself. I'm probably better at it than most.

I think in definitely in the entrepreneur community there's a lot of FOMO and But if you intellectually isolate any of these people that Do a million things. You probably. They will probably acknowledge that if you say yes to everything, then you eventually have to say no to something that mattered.

Yeah.

Or successful entrepreneurs later in their career, you ask them, like, how was it? Says like, well, I did too much of this and not enough of that. I regret this thing. And then the other thing that I see a lot happening is people who are ultra successful, they tended to focus. They were. They said no a lot. They were really laser focused on building one company or two companies or whatever, instead of like starting seven or like, they found something that worked and they. They stick to it for an extended time period. Almost like they did the boring thing over and over again. Not to say that, like, maximizing money is the goal for everyone, but the people who did really well as an entrepreneur tended to say no to most things and just do the same thing over and over again. And. And that's been something I think everybody acknowledges but doesn't live by.

So I constantly check myself at the year end. I do this whole thing where I look at, like, priorities. I used to set goals. I found that I almost most often meet the goals. But then sometimes you get the goal and you're not happy.

Yeah.

So I try to more focus on, like, how do I feel at the end? And that's a big or thematic kind of way to look at goal setting. Goals definitely work, and writing them for sure works. But sometimes you don't know what you want. So really focusing on the feeling helps navigate dynamic situations. The other thing that I try to ask myself all the time, I learned from my friend Jesse was like, you can only do one of three things at a time. You can either recover, be creative, or be productive. If you try to do two of those things at the same time, you're submitting optimal. Because if you.

Wow, that lands. Oh, that one hurt.

That one.

That one hurt.

Well, it gets deeper because it. The mental model he taught me that I used.

Is this Jesse Itzler by chance? No, because it sounds like a Jesse Itzler thing.

No, it's Jesse Michaels. He has a YouTube channel called American Alchemy, mostly about UFOs, but he is one of those.

We're combining two things here.

Tarot. He is, weirdly, one of the smartest people I know. And.

Yeah, and both of his parents were like, amazing thinkers, and he's just very well thought. But back to the yes and no. I look at those three segments and I say, like, if I want to recover, I have to say no to everything, except unless it Supports recovery. And then if I try to be, like, creative while recovering, I'm probably not recovering. So, like, having the courage to allow me to recover when I need to recover and take that seriously. When you are creative, you say yes to everything. And even if it feels weird, like somebody's like, hey, do you want to go make origamis? It's like, no, actually, I should say yes. So when I'm in recovery mode, I say literally no to everything that I can. I just say no, no, no. And just to do the absolute minimum in creativity phase, I try to say yes to all these weird stimuli because you never know what kind of random blue ocean strategies you comes out of them. Like, we just did like a sourdough dinner. And I was like, well, this is really cool. Like, we're making sourdough. And then the productivity is the middle ground where you say yes to the thing that you're trying to optimize productivity for. And then you say no to every other thing. So just checking yourself. And that can be within a year, you can have all, all of those. Within a month, you can even have all of those. But just that helps me to ask myself when I say yes or no, I ask myself, like, what phase I'm in. And then that tells me if I should say yes or no.

Well, how long do you prioritize those blocks of time?

My experience might not be for everyone, but my experience, it goes always in the same circle, is first you recover. When you fully recover, you become curious and you become creative. You throw shit in the wall. Some of them sticks and some starts working. That. That gets. Working starts to own you because it works so well that it suddenly it becomes the center of your life. And you keep doing that until you're tired, and then the cycle starts again. That's been my experience. And yeah, I mean, that's a really.

Helpful frame, Taro, because I'm in one of those modes where I was really productive the last three months, and I can tell I'm getting tired. Cause I really want to be creative, and I just don't have it. I just don't have it. Which means I probably need to prioritize a recovery sprint, which could be two weeks or three weeks.

Honestly, sometimes 48 hours does it. The hard part is getting to the mode of recovery from productivity Sometimes takes me two to three days. But sometimes if you change scenery, like you go to nature, you can kind of shortcut it a little bit. But like, 48 hours of extreme recovery gets you really far.

Interesting.

What I have not figured out is how to go from productivity to creativity. I cannot make that jump. I almost have to go through recovery.

Yeah, I mean, that makes sense. You kind of have to slow down the train before you can make it go in a different direction. And being productive and being creative is just like, almost opposites for me anyway. But what this is helping me do is, you know, there are days that I wake up in the last week or so where I want to be productive, but I just don't have it. That means I either need to take extreme rest this weekend, or it means that I just need to look ahead on the calendar and say, when can I black off a week? What can I black off five days. And if I can look ahead to I'm going to recover, then I can be a little bit more productive because I know that recovery is coming. I think where I get anxious and depressed is when I'm in productive mode. I'm getting to the end of the juice I have in the lemon, and I don't see an end where I can go pick some more lemons. I can just rejuvenate.

And to use your own anecdote about getting money for working capital and inventory. What, you didn't know that, hey, cost 10% for that capital, but it saves me 15% in COGS. And by the way, I struggle with this, too. So this is not like I know any better. But what if you look at it through the lens of like, okay, in a monthly cadence, I actually do get more done. I am more creative if I allow myself these days. So if you take a little bit, you're willing to pay 10% to get 15. But, like, if you're. So.

If I'm trying to bootstrap my time.

Yeah. Then in that point, you're so narrowly focused that you're not willing to pay the 10%. And that 10% is the recovery period that leads to maximize creativity and productivity. But if you're not willing to pay for it. But easier said than done.

Yeah, that's really helpful. This is fun. Taro. I'm a fan, I'm a customer, and I'm really excited for the new venture as well.

Yeah.

It's based here in Austin, right? Yeah, I want to.

How do I get on those supplements?

Amazon.com, my friend, sheer Strength Labs. Okay. It'll turn your dad bot into a father figure.

Okay. Yeah, I'm trying to be a father figure.

Yeah. Good to see you, Taro. Thanks for being here.

Thanks for having me.

I think Taro is An amazing example of if you do a few things well, you can create an incredible company. I loved how Taro was sharing about how the way he would dominate today is he would do less but better. He would do a few things extremely well and then he would try to scale. So often in the entrepreneurial world we want to scale right out of the gate, but it requires that you do a few things better or different from everybody else in order to have something that is even worth scaling. Because otherwise what are you scaling for? So it's about finding where you're different, finding out where you're better. And that comes by serving a person. It comes by serving a group of people that you really care about and giving them unique solutions and communicating them in a way that makes them feel like a person. And when you have that, you can build a community that takes your brand and your product line to whatever level you want it to be. Whether that is a seven figure business or it's an eight, not whatever you want. It all comes down to those same principles. And you can build a company that changes lives and is very fulfilling to do if that calls to you. That's what we help people do by getting four products at 25 sales a day at a 30 price point. But most importantly, the way that you do it is you build a community of people that you actually care about and you actually serve them. And you actually build a raving fan base of people that you're delighted to serve. And when you're ready to go on that journey, you can find out how we help entrepreneurs build seven figure brands and have multimillion dollar exits by building companies that they don't want to sell. And we do that inside of a 1%@capitalism.com 1 hope you enjoyed this conversation with Taro as much as I enjoyed recording it for you. And I'll see you next time. Take care. And now a quick word from Tristina Tim, one of our members from the capitalism.com community.

We joined the incubator because we knew the things that we didn't know. So we didn't know E commerce at all. And we needed that. We needed somebody to tell us where to go and what to do. Right now we are on track to hit the 3 million mark this year. However, I think next year is just going to double that. We have so many plans for the future and just executing the plan that the incubator brought us, it was fantastic. It was step by step, what to do, how to execute it, and then if we did fumble the ball we had somebody there to help us through it and walk us through our plans for the future. Of course, this year we have 3 million and then next year 6. And we're hoping to get to 10 million within the next three to four years. Freedom is everything to our family. I homeschool and I love that our family can wake up together every morning. Nobody's running off to school, nobody's running off to work. If I had to work at like a 9 to 5 job, there's no way that I could also homeschool. I get to set my own hours and they're not as many hours as a normal job would be. So that's really fantastic. But again, freedom is everything for our family and I don't. It's strange that our kids don't know any other way. Mom and dad are home every day. I would describe the capitalism community as family. You get so many tips from people. We give tips and I think that we're going to start to work with a lot of our fellow community members and everyone really is rooting for everybody else. Nobody is like in competition at all. Like everyone is everyone's biggest cheerleaders.

If you found value in this podcast and you're ready to go Deeper, here are three resources where we can help you. One, you can grab my book 12 months to 1 million on Audible or Amazon. It has over a thousand reviews and it's the playbook to building a seven figure business. Second, you can join our community of entrepreneurs who are following a plan to build a 1% net worth by building businesses and investing the profits. You can get plugged in@capitalism.com 1. And third, if you're looking to go deeper and build a seven figure business that you can sell, you can work closely with us inside the Capitalism incubator and you can get on the waiting list and find out what we do over@capitalism.com Inc. That's capitalism.com income.